RNS Number:5080Z
Arla Foods UK PLC
08 June 2004

                                                                   8 June 2004



                               ARLA FOODS UK plc

                             SECOND INTERIM RESULTS
                     FOR THE SIX MONTHS ENDED 31 MARCH 2004

*   First trading result of merged group which created a major UK dairy company 
    with leading market positions and strong brands

*   Continuing sales were #697.9m

*   Underlying* pre-tax profit #21.1 million

*   Adjusted earnings per share 2.4 pence

*   Lurpak brand grew 10%

*   Anchor Spreadable grew 13%

*   Cravendale, the UK's leading branded milk grew 23%.

*   Enlarged supermarket milk business maintained volumes

*   Predicted synergies from the merger of #20 million is anticipated ahead of  
    schedule

*   Initial two-year agreement with TNT Mail on packet distribution

* Before exceptional items and goodwill amortisation.


"Our branded dairy products business continues to perform strongly.  All our
experience to date indicates that the merger will deliver all its anticipated
benefits, and I look forward to reporting continued progress in the remainder of
the current reporting period and in the longer term."

- Sir David Naish, Chairman


ENQUIRIES:
Arla Foods UK plc                                Hudson Sandler
Neil Davidson, Chief Executive                   Michael Sandler/James Benjamin
Nigel Peet, Finance Director                     020 7796 4133
020 7796 4133 on Tuesday 8 June
0116 282 1444 thereafter



                              Chairman's Statement

The first trading results of the merged Group demonstrate progress in all key
areas.  Our brands are performing strongly, supermarket milk volumes are in line
with expectations, our major dairy investments are on schedule, and we have
continued to outperform the market in home delivery. The growth of our mail
distribution business has been enhanced by the signing of an agreement to
co-operate with TNT Mail (a UK subsidiary of TPG NV). We continue to expand our
partnership arrangements with our milk producers.

Results

This second interim report covers the six months to 31 March 2004 and includes
just over five months of trading by the enlarged business that was created by
the merger of Express Dairies and Arla Foods.  This was completed on 22 October
2003, and we have changed our year-end to 30 September to correspond with that
of our major shareholder, Arla Foods amba, which is the EU's largest
farmer-owned dairy co-operative.

Sales for the period were #697.9 million (2003: #323.5 million: all comparatives
refer to the six months to 30 September 2003) and underlying* pre-tax profit was
#21.1 million (2003: #10.1 million).  Exceptional costs of #11.9 million arose
from the first phase of plant and head office rationalisation and the closure of
Express Chilled Distribution, partly offset by property profits on the sale of
surplus depots and dairies.  Profit before taxation was #5.0 million (2003: #6.1
million).

Adjusted earnings per share were 2.4 pence (2003: 2.5 pence), and basic earnings
per share were 0.2 pence (2003: 1.3 pence).

Finances

The first published balance sheet of the enlarged Group shows net debt at 31
March 2004 of #126.9 million (2003: #105.9 million).  The strengthening of our
financial position through the merger is reflected in our improved interest
cover by operating profit (pre goodwill amortisation and pre exceptionals) of
4.8 times (2003: 3.7 times).

* Before exceptional items and goodwill amortisation.

Dividend

The Board has declared a second interim dividend of 0.6 pence per share, the
same as the final dividend paid at this stage in 2003.  This will be payable on
27 August 2004 to those shareholders on the register at 25 June 2004.  Together
with the increased first interim dividend of 0.5 pence paid in February, total
ordinary dividends for the year to date of 1.1 pence are 10 per cent higher than
those of the comparable period last year.  In addition, former Express Dairies
shareholders benefited from the special dividend of 9.6 pence per share paid on
4 November 2003 following completion of the merger.  It is the Board's intention
to review the level of the final dividend in the light of performance and
prospects, and our commitment to pursue a progressive dividend policy in line
with long-term earnings potential and cash flow, whilst maintaining appropriate
levels of cover.

Business review

The merger has created a leading UK dairy company with a broad range of added
value products, strong brands and comprehensive nationwide distribution shortly
to be extended into the central belt of Scotland.  Both our customers and our
farmer suppliers have welcomed this.  Highlights of performance in the six
months to March 2004 include further excellent performances from our Lurpak and
Cravendale brands, the maintenance of our market share in supermarket milk and
continued outperformance of the market in home delivery, aided by the successful
expansion of our mail operation.  We have begun the process of both
rationalising production and reducing administration costs, announcing the
closure of the Bamber Bridge dairy and the glass bottling line at the Hatfield
Peverel dairy and combining head office functions in Leeds.  Our investment
programme is proceeding to plan, with the UK's most technologically advanced
dairy at Stourton, Leeds, on schedule to open in October 2004.  Neil Davidson
comments on these and other developments in more detail in his Chief Executive's
Review.

Relationships with producers

We have long been committed to building inclusive relationships with producers,
and are pleased to report the creation of the Arla Foods Milk Partnership
(AFMP), bringing together all the farmers supplying the Group under direct
contracts.  The Partnership will supply us with over 1 billion litres of milk in
the current milk year, which began on 1 April.  Membership is also set to
expand, with a considerable number of farmers expressing interest in joining,
notably in Yorkshire, with a view to supplying the new Stourton dairy.  We have
also continued to develop our very successful strategic alliance with the Milk
Link farmers co-operative, which includes the Joint Venture: Staplemead Dairy
Products.

I am delighted that EMPI, the investment arm of AFMP, has recently become the
third largest shareholder in the Group with an interest of over 4 per cent.

Whilst the first stage of CAP reform from 1 July will affect the raw milk
pricing environment, the Group has only a very limited exposure to those
long-life commodity markets which will be directly affected. However our raw
milk purchase price has to remain competitive given the markets, in which we
operate.

Outlook

Our branded dairy products business continues to perform strongly.  Changes in
supermarket milk buying arrangements from April resulted in volume reductions
within our range of expectation, and we have since won a sole supply contract
with Asda Walmart.  There has been a very positive customer reaction to the
development of our new Stourton facility, which will provide us with an
excellent platform for further growth in this sector.  We announced in our March
trading update a further #20 million investment on this site to meet growing
demand for Cravendale PurFiltre(R).  The first phase of dairy rationalisation
will be completed in July, and further overhead reductions will be achieved
following our review of central functions.  Although, as previously stated,
synergy benefits in the six months to 30 September will be lower than originally
estimated, this is purely a matter of phasing.  All our experience to date
indicates that the merger will deliver all its anticipated benefits, and I look
forward to reporting continued progress in the remainder of the current
reporting period and in the longer term.


                                                              Sir David Naish DL
                                                                        Chairman


                         Chief Executive's Review

We have begun to realise the benefits of merging Arla Foods and Express Dairies,
creating a broadly based dairy company.  We now have a well-balanced business
with strong finances and substantial managerial and technical resources, well
equipped to offer effective competition right across the chilled dairy cabinet.
We have substantially increased our presence in high growth, added value
sectors, and our brands are among the strongest in our industry.  An investment
programme that will deliver the most advanced fresh milk facilities in the UK is
complementing this favourable market profile.

Branded products

Arla Foods UK is a category leader in the butter, spreads and margarine market,
with a total brand market share of approaching 26 per cent.  We supply two of
the three leading brands, Lurpak and Anchor, which together represent brand
value of over #220 million, and three out of the top five individual products in
the category.

The Lurpak range has performed exceptionally well in a mature market delivering
10 per cent growth overall. The classic Lurpak block maintained its market share
whilst Lurpak Spreadable grew by 13 per cent year on year and Lurpak Lighter
Spreadable by more than 23 per cent as these products continued to achieve
increased distribution and improve their penetration.  This growth is being
supported by the new 'Give In To Lurpak' advertising campaign.

Two years after the Anchor brand joined the Arla portfolio its repositioning and
revitalisation is showing through in the growth of Anchor Spreadable, with over
13 per cent year on year increase in sales and the stabilisation of the core
Anchor block butter volume. New advertising, as part of our substantial
investment in the brand, emphasises its natural credentials.

Cravendale PurFiltre(R), the only mainstream branded fresh milk in the UK,
remains an outstanding success story. It has continued to gain ground in the
fresh milk market with year on year sales increasing by 23 per cent and its
market share now close to 3 per cent.   Its total sales value is approaching #60
million, supported by a significant advertising spend. Over the next 18 months
we will be investing #20 million at our new Stourton facility to double our
processing capacity for this exciting brand.

The fastest growing segment of the dairy cabinet is Speciality Cheese where we
have secured our presence with both the HT Webb business and our branded
imported cheeses from Denmark.

Our branded flavoured milk portfolio of Cafe Met, Gulp! And Breaktime has grown
strongly, by almost 16  per cent year on year, and the premium Cafe Met will
benefit from a new advertising investment beginning this month.

Rationalisation and integration

We have announced two closures that will enable us to increase the utilisation
and efficiency of other plants.  The glass bottling line at the Hatfield Peverel
dairy in Essex closed on 4 May 2004, with production transferring to our sites
in Nottingham and Liverpool.  The Bamber Bridge supermarket dairy in Lancashire
will close next month, and our plants in Liverpool, Manchester and Leeds will
absorb its output.  In addition, the old central Leeds dairy will close in
October 2004 when the Stourton (East Leeds) plant opens, with staff transferring
to the new site.

Ahead of our plan we have completed the integration of the Arla and Express
doorstep delivery networks, under the Express brand.

The former Express Dairies plc head office in Leicester has been closed, with a
number of central functions now integrated in Leeds.  We have identified scope
for further economies following a comprehensive review of our activities in this
area.

Although, as the Chairman has noted, the phasing of the delivery of synergy
benefits is marginally slower than originally anticipated, I am confident that
we will deliver the predicted synergies from the merger of #20 million per annum
ahead of schedule.

In addition to direct cost savings, we are deriving significant and growing
commercial benefits from the enlargement of the Group, with major multiple
supermarkets welcoming our ability to meet a full range of their requirements
and increasingly regarding us as a natural partner to work with them in
developing the entire dairy category.

Retail milk and cream

We are the clear UK market leader in the supply of fresh liquid milk and cream
to retailers.  Our enlarged supermarket milk business maintained its volumes
compared with the previous year in the six months to March: a creditable result
given our decision not to defend certain business in Spring 2003 in the light of
our discussions on the merger.  Volume losses as retailers adjusted their supply
base from April 2004 were within the range that we had anticipated, and winning
a sole supply fresh liquid milk contract with Asda Walmart is important for the
Group.

Customer reaction to our #55 million Stourton investment has been very positive,
and its opening will undoubtedly enhance our marketing capabilities in this
sector.  The building is complete and commissioning trials have already begun;
the plant will be fully operational by October 2004, in line with our plans.
Our competitive position will be further improved by the completion in June 2005
of the #12 million reconstruction of our Manchester dairy, which will create the
most highly automated facility in the North West.

The Claymore Dairies business remains a strategic investment in support of our
future strategy in Scotland, which now takes on a new significance with our sole
supply contract with Asda Walmart. We expect to establish a processing unit to
serve the densely populated central belt of Scotland within the next 12 months.
We look forward to the Competition Appeal Tribunal's full hearing of our appeal
relating to Chapter II (abuse of dominant position) of the Competition Act,
which is now likely to be scheduled for later this year.  Our case under Chapter
I (cartel) is currently stayed pending the results of the new investigation
being undertaken by the OFT.

We have maintained our strong position in the retail cream market, based on our
dedicated facilities and the quality of the product they supply.

Home delivery

We have continued to outperform the market in this sector, holding the
year-on-year decline in milk volume at lower than 10 per cent.  Restricting the
turnover of delivery personnel is a key factor in maintaining customer loyalty,
and our franchisee retention has been assisted by our continued expansion in
mail delivery.  We have also been able to convert more rounds to franchises,
with the proportion of franchisees in the business currently at an all-time
high.

We handled some five million items of mail in the first year of our licence from
Postcomm, awarded in April 2003.  Average volumes per round and revenue per item
are both showing encouraging increases.  Our growing experience of the market is
prompting us to focus on increasing share in those product areas where we have a
particular competitive advantage, notably heavier items that are suitable for
letterbox delivery such as catalogues and books.

Reflecting our growing confidence in this business as an excellent fit with our
milk delivery operations we have today signed a two-year agreement with TNT Mail
(a UK subsidiary of the Dutch Post Office, TPG NV). Under this agreement TNT
Mail will provide all sales, marketing and administrative services allowing us
and our franchisees to concentrate on last mile delivery. This agreement firmly
establishes our credentials in the mail distribution market.

Distribution

We have withdrawn from the increasingly competitive third party chilled
distribution business to focus our energies on the management of the internal
distribution requirements of the enlarged Group.  Our operation at Alcester in
the West Midlands was sold to Corby Chilled Distribution Ltd for #2.8 million in
March 2004 The impact of this sale and the closure costs of the other chilled
distribution sites have been treated as non-operating exceptional items in the
accounts.

People

Our employees appreciate the opportunities that the merger has created, and this
was reflected in the oversubscription of the Share Incentive Plan that we
recently launched to help them acquire a stake in the company.  I am grateful
for the understanding and support of all our people during a period of major
reconstruction and rationalisation of the Group.


                                                Neil Davidson
                                              Chief Executive



                                Financial Review

Turnover and Underlying Pre-tax Profit

These interim accounts for the six months to March 2004 contain 27 weeks of
trading for the original Express business and 23.5 weeks for the acquired Arla
UK business. For the enlarged group on a like for like basis compared to 27
weeks to March 2003 sales of the imported mostly branded products on which we
earn commission showed a value improvement of 3%. Over the same comparison
period, milk sales volume figures for the enlarged group showed a 1.4% decline
with reductions of around 10% on the doorstep almost offset by growth in the
supermarket sector, helped by the strength of the Cravendale brand.

Underlying pre tax profit, which we consider to be our primary profit measure,
increased by #11.0 million to #21.1 million compared to the previous six month
period as a consequence of the merger with Arla UK. On this measure, profits for
the last 12 months totalled #31.2 million.
                                                     Six months to 31    Six months to 30             Year to
                                                          March  2004      September 2003       31 March 2003
                                                                   #m                  #m                  #m
                                                     ________________    ________________       _____________           
              
Pre-tax profit                                                    5.0                 6.1                11.6
Discontinued operations                                             -                   -               (0.9)
Goodwill amortisation                                             4.2                 2.2                 4.6
Exceptional items                                                11.9                 1.8                12.7
                                                             ________            ________              ______
Underlying pre tax profit                                        21.1                10.1                28.0
                                                             ________            ________              ______
                                                                 

As explained in note 9 of the interim report, the operations of Arla UK have
been integrated with those of the existing group. On an indicative basis the
underlying pre-tax profit splits #10.5 million for Arla UK and #10.6 million for
the original Express business. With limited synergy impacts in this period, this
performance was broadly similar to the previous, pre-merger six month period.

The discontinued activities in prior periods relate to the sale of our UHT
business.

Comparative profits have been restated to reflect the impact of implementing
UITF 38 'Accounting for ESOP trusts' and UITF 17 Revised 'Employee Share
Schemes'.  The effects have been to increase the comparative charge to profits
(by #0.4million for the 12 months to March 2003 and by #0.2million for the six
months to September 2003) and to deduct shares held in an ESOP from
shareholders' funds.  Under the previous accounting policy, these shares were
shown as an investment and carried at amortised cost.

Goodwill

Goodwill amortisation primarily represents the Arla UK transaction together with
the Glanbia UK liquid milk acquisition in 1999.  Both of these acquisitions are
amortised over 20 years.

The merger with Arla UK completed on 22 October 2003. Under the terms of the
merger we issued 310.9 million new shares to the Arla Foods amba Group.  The new
shares have a nominal value of 2p each and had a market value on the day of
issue of 44.375p each.  This market value of shares issued of #137.9 million,
together with transaction costs of #6.4 million compares to a fair value of
assets acquired of #103.6 million to give a provisional goodwill arising on the
merger of #40.7 million.  The actual goodwill calculation is still subject to
confirmation of the fair value adjustments to the Arla UK balance sheet.

Fair value adjustments include #28.6 million of bank loans previously owed by
Arla UK to a member of the Arla amba group.  The benefit of this bank loan was
transferred to Arla Foods UK plc on completion of the merger.  The other
significant fair value adjustment is recognition of a pensions deficit of #21.0
million.  This deficit relates to the primary Arla UK pension scheme and has
been computed using SSAP24 principles.  The group continues to use SSAP24 for
calculating pension charges.  The deficit using FRS17/IAS19 principles would not
necessarily be the same amount.

The transaction satisfies the requirement of merger relief in respect of shares
issued in exchange for shares in Arla UK.  Accordingly a merger reserve of
#104.5 million arises on this transaction.  The value of shares attributed to
the bank loan of #28.6 million does not meet the requirements of merger relief
and the excess over nominal value of these shares has been credited to share
premium account.

Exceptional items

Exceptional costs totalled #11.9 million in the six months to 31 March 2004.
Operating exceptionals of #10.5 million were a direct result of the Arla UK
transaction and principally comprised asset write-downs of #3.2 million,
provision for redundancy costs at Bamber Bridge and at the Hatfield Peveral
glass bottling line of #3.3 million, together with redundancy costs arising from
integrating the two depot networks and the initial phase of centralising head
office functions.  These exceptional charges are in line with our projections
included in the Listing Particulars for the merger.  Non-operating exceptionals
comprise a #3.0 million loss arising on the combination of the sale of a major
component of our Chilled Distribution business together with the costs of the
consequent closure of the balance of this business.  Profit on disposal of fixed
assets of #1.6 million was generated from the sale of a number of our surplus
dairies and depots.

Free cash flow analysis

                                                                      Six months to     Six months to 30        Year to
                                                                           31 March       September 2003  31 March 2003
                                                                               2004                   #m             #m
                                                                                 #m          ___________
                                                                                                               ________
                                                                         __________

Operating profit                                                               12.0                  9.8           20.3
Working capital                                                                37.0               (15.4)           11.4
Other operating movements                                                      22.8                 11.5           25.1
                                                                            _______              _______          _____
Net cash inflow from operating activities                                      71.8                  5.9           56.8
Add back cash exceptionals                                                      7.3                  1.8           12.8
Capital expenditure                                                          (33.0)                (5.3)         (10.9)
Wholesale doorstep acquisitions                                               (0.1)                (0.2)          (0.4)
Proceeds from asset disposals                                                   6.5                  2.5            5.6
Net tax paid                                                                  (3.3)                    -          (1.2)
                                                                            _______              _______        _______
Underlying free cash flow                                                      49.2                  4.7           62.7

Net acquisitions                                                              (4.1)                    -          (5.3)
Proceeds from disposal of business                                              2.8                    -           30.0
Cash exceptionals                                                             (7.3)                (1.8)         (12.8)
                                                                            _______               ______        _______
Free cash flow                                                                 40.6                  2.9           74.6

Interest                                                                      (5.6)                (3.7)          (8.8)
Dividends                                                                    (31.6)                (1.8)          (1.2)
                                                                            _______               ______        _______
Net cash flow                                                                   3.4                (2.6)           64.6

Net debt (acquired)/disposed of                                              (24.4)                    -            0.9
                                                                            _______               ______        _______
(Increase)/decrease in net debt                                              (21.0)                (2.6)           65.5
                                                                            _______               ______        _______


The strong working capital inflow in the period was a result of a number of
factors.  Arla UK trade debtors were acquired mid period and have reduced due to
normal month end receipts from major customers.  Prepayments reduced as a number
of costs (notably insurance) are paid in advance and run on a 1 April to 31
March cycle.  In addition, transaction costs have been transferred out of
prepayments.  Trade creditors have increased due to the twenty-seven week
period, whilst accruals have risen because of exceptional provisions.

The other operating movements are primarily the charge for depreciation,
including asset write offs and the amortisation of goodwill.

Capital expenditure of #33.0 million includes #18.1 million on the construction
of our dairy at Stourton, near Leeds (cumulative spend is now #33 million of the
#55 million project total). Other capital projects include #1 million on the
Manchester dairy project and #2.0 million at Oakthorpe.  Asset disposals are the
sale of surplus properties.  Net acquisitions comprise the cash cost of the Arla
UK transaction less net cash balances acquired, whilst disposal proceeds arise
from the partial sale of the Chilled Distribution business.

Interest

Net interest payable of #5.6 million was #1.9 million higher than in the
previous six months, reflecting a combination of acquired debt, increased
capital expenditure and the special dividend of #28.6 million. Interest cover
has improved from 3.7 to 4.8.

Taxation

The effective group tax rate, excluding exceptionals, is 40.6%.  This is a
higher effective rate than in previous periods because of the increase in
goodwill amortisation arising from the Arla UK transaction.  The current
goodwill amortisation charge is expected to continue for the foreseeable future.

Dividends

Dividends charged to the profit and loss account includes a special dividend of
9.6 pence per share paid on 4 November 2003 to existing shareholders in the
company pre merger.  A second interim dividend of 0.6 pence per share is
proposed.  (2003:  0.5 pence).

Earnings per share

Adjusted earnings per share (i.e. pre exceptional items and goodwill
amortisation) of 2.4p was broadly in line with the previous period as higher
profits were matched by an increase in the number of shares in issue.  Basic
earnings per share fell to 0.2p (2003:  1.3p) due to the increase in exceptional
costs.


Nigel Peet
Finance Director


GROUP PROFIT AND LOSS ACCOUNT
for the six months to 31 March 2004


                                                                                               Restated        Restated
                                                                              Unaudited       Unaudited         Audited
                                                             Notes           six months   six months to            Year
                                                                            to 31.03.04        30.09.03     to 31.03.03
                                                                                     #m              #m              #m
                                                                                     
Turnover
Group and share of joint venture                                                  700.0           325.3           716.2
Less share of joint venture                                                       (2.1)           (1.8)           (1.5)
Continuing operations                                                             697.9           323.5           697.2
Discontinued operations                                                               -               -            17.5
                                                                                 ______          ______          ______
Group turnover                                                   2                697.9           323.5           714.7

Cost of sales                                                                   (506.4)         (220.5)         (474.5)
                                                                                 ______           _____           _____
Gross profit                                                                      191.5           103.0           240.2
Operating expenses before goodwill amortisation
and operating exceptional items                                  3              (164.1)          (89.1)         (202.1)
                                                                                 ______          ______          ______
Operating profit before goodwill amortisation and operating
exceptional items                                                                  27.4            13.9            38.1
                                                                                   
Goodwill amortisation                                                             (4.2)           (2.2)           (4.6)
Operating exceptional items                                      4               (10.5)           (1.8)          (12.9)
                                                                                 ______         _______         _______
Operating profit
Continuing operations                                                              12.7             9.9            19.7
Discontinued operations                                                               -               -             0.9
                                                                                 ______          ______          ______
                                                                                   12.7             9.9            20.6

Share of loss in joint venture                                                    (0.4)           (0.1)           (0.3)
Share of loss in associate                                                        (0.3)               -               -
                                                                                 ______          ______          ______
                                                                                   12.0             9.8            20.3

Non operating exceptional items                                  4                (1.4)               -             0.2
                                                                                 ______          ______          ______
                                                                                   10.6             9.8            20.5

Net interest payable                                             5                (5.6)           (3.7)           (8.9)
                                                                                 ______          ______          ______
Profit on ordinary activities before taxation                                       5.0             6.1            11.6
Tax on profit on ordinary activities                             6                (3.7)           (2.3)           (4.4)
                                                                                 ______         _______          ______
Profit on ordinary activities after taxation                                        1.3             3.8             7.2

Equity dividends                                                 7               (32.2)           (3.0)           (3.0)
                                                                                 ______          ______          ______
(Deficit)/retained profit for the period                                         (30.9)             0.8             4.2
                                                                                 ______          ______          ______
Earnings per ordinary share - basic                              8                 0.2p            1.3p            2.4p
                            - adjusted                           8                 2.4p            2.5p            6.6p
                            - diluted                            8                 0.2p            1.3p            2.4p






GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the six months to 31 March 2004

                                                                                                 Restated      Restated
                                                                               Unaudited        Unaudited  Audited Year 
                                                                              six months   six months  to   to 31.03.03 
                                                                             to 31.03.04         30.09.03
                                                                                      #m               #m            #m

Profit attributable to shareholders                                                  1.3              4.0           7.6
Prior year adjustments - implementation of UITF 38/17                              (0.6)                -             -
                                                                                  ______           ______        ______

Total recognised gains and losses since the last annual report                       0.7              4.0           7.6
                                                                                  ______           ______        ______



SUMMARISED GROUP BALANCE SHEET
at 31 March 2004
                                                                                          Restated             Restated
                                                                    Unaudited            Unaudited              Audited
                                                                     31.03.04             30.09.03             31.03.03
                                                                           #m                   #m                   #m
Fixed assets
Intangible assets                                                       105.8                 55.2                 57.2
Tangible assets                                                         232.9                127.8                133.1
Investments
    Investment in joint venture
    Share of gross assets                                                 4.3                  3.8                  3.7
    Share of gross liabilities                                          (2.6)                (1.7)                (1.5)
                                                                   __________             ________             ________
                                                                          1.7                  2.1                  2.2
    Investment in associate                                               1.7                  2.0                  2.0
                                                                   __________             ________             ________
                                                                          3.4                  4.1                  4.2
                                                                   __________             ________             ________
                                                                        342.1                187.1                194.5
                                                                   __________             ________             ________
Current assets
Stocks                                                                   23.0                  6.8                  7.4
Debtors                                                                 136.1                 71.4                 64.2
Deferred taxation (due in more than one year)                             4.3                    -                    -
Cash at bank and in hand                                                 57.3                 12.9                 21.6
                                                                   __________             ________             ________
                                                                        220.7                 91.1                 93.2
                                                                   __________             ________             ________
Creditors: due within one year
Borrowings                                                               10.4                 11.3                 14.0
Trade creditors                                                         147.1                 54.8                 58.4
Other creditors and accruals                                             43.9                 36.3                 40.4
Current taxation                                                          9.4                  8.9                  6.1
Dividend payable                                                          3.6                  3.0                  1.8
                                                                   __________             ________             ________
                                                                        214.4                114.3                120.7
                                                                   __________             ________             ________
Net current assets/(liabilities)                                          6.3               (23.2)               (27.5)
                                                                   __________             ________             ________
Total assets less current liabilities                                   348.4                163.9                167.0
                                                                   __________             ________             ________
Creditors: due after one year
Borrowings                                                              173.8                107.5                110.9
                                                                   __________             ________             ________
                                                                        174.6                 56.4                 56.1
                                                                   __________             ________             ________
Provisions for liabilities and charges
Deferred taxation                                                           -                  9.8                 10.5
Post retirement health care                                               1.2                  1.3                  1.4
Pensions                                                                 21.0                    -                    -
                                                                      _______              _______              _______
                                                                         22.2                 11.1                 11.9
                                                                      _______              _______              _______
                                                                        152.4                 45.3                 44.2
                                                                      _______              _______              _______
Capital and reserves
Called up share capital                                                  12.2                  6.0                  6.0
Share premium account                                                    27.4                  0.2                  0.2
Merger reserve                                                           99.6                (4.9)                (4.9)
Investment in own shares                                                (2.6)                (2.6)                (2.6)
Profit and loss account                                                  15.8                 46.6                 45.5
                                                                      _______              _______              _______
Equity shareholders' funds                                              152.4                 45.3                 44.2
                                                                      _______              _______              _______

GROUP CASH FLOW STATEMENT
for the six months to 31 March 2004
                                                                                             Restated        Restated
                                                                          Unaudited         Unaudited         Audited
                                                                         six months       six months             Year
                                                                        to 31.03.04       to 30.09.03     to 31.03.03
                                                                                 #m                #m              #m

Operating profit                                                               12.0               9.8            20.3
Share of loss in joint venture                                                  0.4               0.1             0.3
Share of loss in associate                                                      0.3                 -               -
Depreciation including operating exceptional write down                        17.8               8.9            19.4
Amortisation                                                                    4.2               2.2             4.6
Provision against fixed asset investment                                          -                 -             0.3
Profit on disposal of intangible fixed assets                                     -                 -           (0.1)
UITF 38/17 credit                                                               0.1               0.3             0.6
Working capital movement                                                       37.0            (15.4)            11.4
                                                                             ______            ______          ______
Net cash inflow from operating activities                                      71.8               5.9            56.8

Returns on investments and servicing of finance

Net proceeds on realised gains on financial instruments                           -                 -             0.3
Interest received                                                               0.1               0.1             0.3
Interest paid                                                                 (5.4)             (3.6)           (9.1)
Interest element of finance lease rental payments                             (0.3)             (0.2)           (0.3)
                                                                             ______            ______          ______
Net cash outflow from returns on investments and servicing of
finance
                                                                              (5.6)             (3.7)             (8.8)

Taxation paid                                                                 (3.3)                 -             (1.2)

Capital expenditure and financial investment
Purchase of tangible fixed assets                                            (33.0)             (5.3)            (10.9)
Proceeds from disposal of intangible and tangible fixed assets                  6.5               2.5             5.6
                                                                             ______            ______          ______
Net cash outflow from capital expenditure                                    (26.5)             (2.8)             (5.3)

Acquisitions and disposals

Disposal of businesses (including expenses)                                     2.8                 -            30.0
Acquisitions of businesses (including expenses)                               (6.5)             (0.2)           (5.7)
Net cash balances acquired on acquisitions                                      2.3                 -               -
                                                                             ______            ______          ______
Net cash (outflow)/inflow on acquisitions and disposals                       (1.4)             (0.2)            24.3

Equity dividends paid                                                        (31.6)             (1.8)           (1.2)
                                                                             ______            ______          ______
Cash inflow/(outflow) before financing                                          3.4             (2.6)            64.6

                                                                             ______            ______          ______

Financing
Movement in short term borrowings                                            (17.4)                 -           (1.7)
Movement in long term borrowings                                               47.6             (7.8)          (64.7)
Repurchase and cancellation of US Loan Notes                                  (0.7)                 -           (8.7)
Proceeds from sale and leaseback transactions                                  24.3               9.8               -
Capital element of finance lease rental payments                              (6.1)             (3.2)           (2.5)
                                                                            _______           _______         _______
Net cash inflow/(outflow) from financing                                       47.7             (1.2)          (77.6)
                                                                            _______           _______         _______
Increase/(decrease) in cash in the period                                      51.1             (3.8)          (13.0)
                                                                            _______           _______         _______



In the six months to 31 March 2004 there was a significant non-cash movement
relating to the acquisition of Arla Foods plc.   Ordinary shares to the value of
#137.9m were issued as consideration for the acquisition of 100% of the ordinary
shares of Arla Foods plc.


RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
for the six months to 31 March 2004

                                                                                          Restated              Restated
                                                                       Unaudited         Unaudited               Audited
                                                                      six months        six months                  Year
                                                                     to 31.03.04       to 30.09.03           to 31.03.03
                                                                              #m                #m                    #m

Profit attributable to equity shareholders                                   1.3               3.8                   7.2
Equity dividends                                                          (32.2)             (3.0)                 (3.0)
                                                                         _______           _______               _______

                                                                          (30.9)               0.8                   4.2
Other movements:
New shares issued                                                          137.9                 -                     -
Goodwill realised                                                              -                 -                   8.2
UITF 38/17 credit                                                            0.1               0.3                   0.6
                                                                         _______           _______               _______

                                                                           138.0               0.3                   8.8

Net increase in equity shareholders' funds                                 107.1               1.1                  13.0

Opening equity shareholders' funds
As previously reported                                                      45.5              44.5                  31.7
Prior period adjustment                                                    (0.2)             (0.3)                 (0.5)
                                                                          ______            ______                ______
As restated                                                                 45.3              44.2                  31.2

                                                                          ______            ______                ______

Closing equity shareholders' funds                                         152.4              45.3                  44.2
                                                                          ______            ______                ______



RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
for the six months to 31 March 2004

                                                                            Unaudited          Unaudited         Audited
                                                                           six months         six months            Year
                                                                          to 31.03.04        to 30.09.03     to 31.03.03
                                                                                   #m                 #m              #m
Increase/(decrease) in cash in the period                                        51.1              (3.8)          (13.0)

Cash (inflow)/outflow from (increase)/decrease in debt and
lease financing                                                                (47.7)                1.2            77.6
                                                                              _______            _______         _______

Change in net debt arising from cash flows                                        3.4              (2.6)            64.6

Bank loans and finance leases (acquired)/disposed of with
businesses                                                                     (24.4)                  -             0.9
                                                                              _______            _______         _______

(Increase)/decrease in net debt in the period                                  (21.0)              (2.6)            65.5
                                                                              _______            _______         _______

Net debt brought forward                                                      (105.9)            (103.3)         (168.8)
                                                                              _______            _______         _______

Net debt carried forward                                                      (126.9)            (105.9)         (103.3)
                                                                              _______            _______         _______



NOTES TO THE ACCOUNTS

1.     Basis of preparation

The interim report, for a twenty seven week period, which was approved by the
Board of Directors on 8 June 2004, does not comprise full accounts within the
meaning of the Companies Act 1985. The interim financial information is
unaudited but has been reviewed by the auditors.  It has been prepared on a
consistent basis using the same accounting policies set out in the audited
accounts for the year to 31 March 2003, except that the interim report reflects
UITF 38 'Accounting for ESOP Trusts' and UITF 17 revised 'Employee Share
Schemes'.

Comparative figures for the year ended 31 March 2003 have been extracted from
the statutory accounts which have been filed with the Registrar of Companies and
on which the auditors gave an unqualified report.

2.        Turnover

Turnover by geographic market amounted to:-

                                                                        Unaudited          Unaudited            Audited
                                                                       six months         six months               Year
                                                                      to 31.03.04        to 30.09.03        to 31.03.03
                                                                               #m                 #m                 #m
Continuing operations
UK                                                                          689.2              316.9              686.4
Rest of Europe                                                                8.7                6.6               10.8
Rest of the World                                                               -                  -                  -
                                                                           ______             ______             ______
                                                                            697.9              323.5              697.2

Discontinued operations
UK                                                                              -                  -               17.4
Rest of Europe                                                                  -                  -                0.1
Rest of the World                                                               -                  -                  -
                                                                           ______             ______             ______
                                                                                -                  -               17.5
Total
UK                                                                          689.2              316.9              703.8
Rest of Europe                                                                8.7                6.6               10.9
Rest of the World                                                               -                  -                  -
                                                                           ______             ______             ______
                                                                            697.9              323.5              714.7
                                                                           ______             ______              _____



3.    Operating expenses


                                                                                            Restated           Restated
                                                                        Unaudited          Unaudited            Audited
                                                                       six months         six months               Year
                                                                      to 31.03.04        to 30.09.03        to 31.03.03
                                                                               #m                 #m                 #m

Distribution costs                                                        (119.7)             (71.1)            (149.3)
Administrative expenses                                                    (48.6)             (20.2)             (57.4)
                                                                          _______            _______            _______
                                                                          (168.3)             (91.3)            (206.7)

Add back goodwill amortisation                                                4.2                2.2                4.6
                                                                          _______            _______            _______
Operating expenses before goodwill amortisation and
operating exceptional items                                               (164.1)             (89.1)            (202.1)
                                                                          _______            _______            _______



NOTES TO THE ACCOUNTS (continued)

4.       Exceptional items

                                                                       Unaudited           Unaudited            Audited
                                                                      six months          six months               Year
                                                                     to 31.03.04         to 30.09.03        to 31.03.03
                                                                              #m                  #m                 #m
Operating exceptional items:
Rationalisation costs                                                     (10.5)                   -             (12.9)
Bank facility costs                                                            -               (1.8)                  -
                                                                         _______             _______            _______
                                                                          (10.5)               (1.8)             (12.9)
                                                                         _______             _______            _______
Non operating exceptional items:
Losses on disposals of businesses                                          (3.0)                   -              (0.8)
Profit on disposal of fixed assets                                           1.6                   -                1.0
                                                                         _______             _______             ______
                                                                           (1.4)                   -                0.2
                                                                         _______             _______            _______


The operating exceptional items in the six months to 31 March 2004 primarily
relate to asset write downs and redundancy accruals in respect of announced
dairy closures, together with costs incurred in rationalising central and depot
operations.

The operational exceptional item in the six months to 30 September 2003 arose
from additional bank facility costs incurred as part of the merger and other
associated arrangements with Arla Foods plc.  The operating exceptional items in
the year to 31 March 2003 arose primarily from the rationalisation of the
group's depot network, from the costs of sales and management restructuring and
from the completion of the centralisation of the group's administration and
financial functions.

The loss on disposal of business in the six months to 31 March 2004 relates to
the sale and closure of the group's Chilled Distribution operations.

The loss on disposal of businesses in the year to 31 March 2003 related to the
disposal of the group's UHT operations and Frome creamery.  This loss was after
writing back #8.2m goodwill previously written off to reserves.

A tax credit of #3.6m arises on exceptional items (30.9.03: #0.5m, 31.3.03:
#4.3m).

5.         Net interest payable

                                                                      Unaudited           Unaudited             Audited
                                                                     six months          six months                Year
                                                                    to 31.03.04         to 30.09.03         to 31.03.03
                                                                             #m                  #m                  #m

Net interest payable                                                      (5.6)               (3.7)               (9.2)
Net recognised gains on financial instruments                                 -                   -                 0.3
                                                                         ______              ______              ______
                                                                          (5.6)               (3.7)               (8.9)
                                                                         ______              ______              ______



NOTES TO THE ACCOUNTS (continued)

6.     Taxation

     The taxation charge for the six months to 31 March 2004 has been calculated
on the basis of the estimated effective tax rate on profits pre exceptional
items for the eighteen months to 30 September 2004 of 40.6% (30.9.03: 34.6%,
31.3.03: 35.0%).  The estimated effective tax rate is more than 30% due
principally to goodwill amortisation for which no tax relief is available.

7.        Equity dividends

 Equity dividends in the six months to 31 March 2004 include a special dividend
of #28.6m paid on 4 November 2003.  This special dividend of 9.6 pence per share
was paid to existing shareholders of the company prior to the acquisition of
Arla Foods plc.

8.        Earnings per ordinary share


                                                                                              Restated          Restated
                                                                       Unaudited             Unaudited           Audited
                                                                      six months            six months              Year
                                                                     to 31.03.04           to 30.09.03       to 31.03.03
                                                                              #m                    #m                #m
Calculation of earnings:
FRS 14 - basic and diluted                                                   1.3                   3.8               7.2
                                                                          ______                ______            ______
Adjusted:
Profit for the period                                                        1.3                   3.8               7.2
Add back/(deduct):
Discontinued operations                                                        -                     -             (0.9)
Exceptional items                                                           11.9                   1.8              12.7
Tax thereon                                                                (3.6)                 (0.5)             (4.0)
                                                                          ______                ______            ______
                                                                             8.3                   1.3               7.8
Goodwill amortisation, pre exceptionals                                      4.2                   2.2               4.6
                                                                          ______                ______            ______
Adjusted earnings                                                           13.8                   7.3              19.6
                                                                          ______                ______            ______


                                                                       Unaudited             Unaudited           Audited
                                                                      six months            six months              Year
                                                                     to 31.03.04           to 30.09.03       to 31.03.03
                                                                            No.m                  No.m              No.m
Calculation of weighted average number of shares:

FRS 14 -  basic and adjusted                                               573.2                 297.4             297.3
             -  diluted                                                    573.6                 297.4             297.3
                                                                          ______                ______            ______


Weighted average number of shares year on year is after taking account of shares
in the company held on behalf of the group LTIP.

Adjusted earnings per share is included as, in the opinion of the directors, it
provides a better understanding of the underlying trading performance of the
group.

Diluted earnings per share includes the weighted average number of shares in
issue during the period after including the effect of all potentially dilutive
shares.


NOTES TO THE ACCOUNTS (continued)

9.       Acquisitions

Under the acquisition method of accounting the impact on the group balance sheet
of the acquisitions during the period was:

Arla Foods plc (acquired 22 October 2003)


                                                                      Book value          Adjustments        Fair value
                                                                              #m                   #m                #m

Intangible fixed assets                                                     15.7                    -              15.7
Tangible fixed assets                                                       97.8                (0.4)              97.4
Stocks                                                                      18.0                    -              18.0
Debtors                                                                     88.2                (0.4)              87.8
Deferred taxation                                                            7.0                  7.1              14.1
Bank and cash balances                                                    (26.3)                 28.6               2.3
Loans and finance leases                                                  (24.0)                (0.4)            (24.4)
Creditors                                                                 (84.9)                (1.4)            (86.3)
Provisions                                                                     -               (21.0)            (21.0)
                                                                          ______               ______            ______
                                                                            91.5                 12.1             103.6
Goodwill                                                                                                           40.7
                                                                                                                 ______
Consideration                                                                                                     144.3
                                                                                                                 ______

       Consideration is the market value of shares issued on the date of
acquisition (#137.9m) together with transaction costs attributable to the
acquisition (#6.4m).  Fair values are provisional and will be reassessed.  The
adjustment to bank and cash balances relates to a loan owed by Arla Foods plc
which was acquired by Arla Foods UK plc. The adjustment to provisions relates to
a pensions deficit. Other adjustments relate to the alignment of accounting
policies. The adjustment to deferred tax is 30% of the relevant gross fair value
adjustments.  Other acquisitions are of dairy goodwill and were acquired for
cash.

       Following the acquisition of Arla Foods plc on 22 October 2003, the
operations of that entity have been progressively integrated with those of the
on-going business.  In particular there has been movement of sales volumes,
centralisation of borrowing facilities and realignment of management and
functional responsibilities.  As a consequence, it is not possible to provide
detailed disclosures of profits and cash flows arising from the acquisition and
indicative numbers only can be given.  On this basis, turnover from the acquired
operations for the period from 22 October 2003 to 31 March 2004 was #343.9m with
operating profit (pre operating exceptionals and pre goodwill amortisation) of
#12.3m.  Continuing integration is expected in the period to 30 September 2004
such that further disclosures at that time will not be possible.

10.    Prior Period Adjustment

The prior period adjustment relates to a change in accounting policy for ESOP
trusts.  Following the issue of UITF 38 and a revised UITF 17, the consideration
paid for the acquisition of a company's own shares has now been deducted in
arriving at shareholders funds.  Opening investments have now been reduced by
#0.5m and #0.3m at 31 March 2003 and 30 September 2003 respectively, with a
corresponding reduction in shareholder funds.  Additional charges have been
reflected for the year ended 31 March 2003 and for the six months ended 30
September 2003 of #0.4m and #0.2m respectively.

11.   The interim report is being posted to all shareholders and will be
available on request from the Secretary, Arla Foods UK plc, Arla House, 4
Savannah Way, Leeds Valley Park, Leeds, LS10 1AB.

INDEPENDENT REVIEW REPORT TO ARLA FOODS UK PLC

We have been instructed by the company to review the financial information for
the six months ended 31 March 2004, which comprises the group profit and loss
account, group statement of total recognised gains and losses, summarised group
balance sheet, group cash flow statement and the related notes 1 to 10.  We have
read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.

This report is made solely to the company in accordance with Bulletin 1999/4 "
Review of interim financial information" issued by Auditing Practices Board.  To
the fullest extent permitted by the law, we do not accept or assume
responsibility to anyone other than the Company, for our work, for this report,
or for the conclusion we have formed.

Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of and has been approved by the directors.  The directors are
responsible for preparing the interim report in accordance with the Listing
Rules of the London Stock Exchange which require that the accounting policies
and presentation applied to the interim figures should be consistent with those
applied in preparing the preceding annual accounts except where any changes, and
the reasons for them, are disclosed.

Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/4
"Review of interim financial information" issued by the Auditing Practices Board
for use in the United Kingdom.  A review consists principally of making
enquiries of group management and applying analytical procedures to the
financial information and underlying financial data and based thereon, assessing
whether the accounting policies and presentation have been consistently applied
unless otherwise disclosed.  A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions.  It is
substantially less in scope than an audit performed in accordance with United
Kingdom Auditing Standards and therefore provides a lower level of assurance
than an audit. Accordingly we do not express an audit opinion on the financial
information.

Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 March 2004.

Ernst & Young LLP
Nottingham

8 June 2004



                      This information is provided by RNS
            The company news service from the London Stock Exchange
END

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